M/S CARNATION INSURANCE BROKING COMPANY PVT. LTD,NEW DELHI vs. DCIT, NEW DELHI

The present appeal has been filed by the assessee against the order of ld. CIT (A)-35, New Delhi dated 21.09.2016.

During the course of hearing today, nobody was present on behalf of the assessee, neither any adjournment was sought, hence the matter being decided on merits based on the facts available on record.

Following grounds have been raised by the assessee: “On the facts and circumstances of the case, the ld. CIT (A) is not justified in sustaining the disallowance of Rs.63,10,273/-, being the aggregate of all the expenses debited to Profit and Loss Account on the ground that the business of the appellant had not commenced as it had not generated any revenue. The ld. CIT (A) has failed to make a distinction between “Set up of Business” and “Commencement of Business.”

The assessee incurred expenses of salaries, staff welfare, local conveyance & travelling expenses and claimed them as business expenditure during the year. The ld. CIT (A) confirmed disallowance of expenses as business has not commenced. The assessee has applied for license from IRDA to carry out business of direct insurance broker for life insurance and general insurance. No license has been granted during the year. Hence, it can be said that business has not taken place. The cases relied by the assessee have been perused and found that they are not applicable to the facts of the present case. Placing reliance on the judgment of Hon’ble High Court of Delhi in Hughes Scotts Communications in of 2006 wherein the placing of purchase order is treated as commencement of business and keeping in view the facts that the assessee has not embarked any business activity during the year and in the absence of even the license to do so, the expenditure claimed by the assessee cannot be treated as business expenditure. We decline to interfere with the order of the ld. CIT (A).

In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 07/01/2020.